Why ?Business Needs Certainty? is Destructive ? naked capitalism

Why ?Business Needs Certainty? is Destructive

This is the start of my final guest post in Glenn Greenwald?s slot at Salon:

If you read the business and even the political press, you?ve doubtless encountered the claim that the economy is a mess because the threat to reregulate in the wake of a global-economy-wrecking financial crisis is creating ?uncertainty.? That is touted as the reason why corporations are sitting on their hands and not doing much in the way of hiring and investing.

This is propaganda that needs to be laughed out of the room.

I approach this issue as as a business practitioner. I have spent decades advising major financial institutions, private equity and hedge funds, and very wealthy individuals (Forbes 400 level) on enterprises they own. I?ve run a profit center in a major financial firm and have have also operated a consulting business for over 20 years. So I?ve had extensive exposure to the dysfunction I am about to describe.

Commerce is all about making decisions and committing resources with the hope of earning profit when the managers cannot know the future. ?Uncertainty? is used casually by the media, but when trying to confront the vagaries of what might happen, analysts distinguish risk from ?uncertainty?, which for them has a very specific meaning. ?Risk? is what Donald Rumsfeld characterized as a known unknown. You can still estimate the range of likely outcomes and make a good stab at estimating probabilities within that range. For instance, if you open an ice cream store in a resort area, you can make a very good estimate of what the fixed costs and the margins on sales will be. It is much harder to predict how much ice cream you will actually sell. That is turn depends largely on foot traffic which in turn is largely a function of the weather (and you can look at past weather patterns to get a rough idea) and how many people visit that town (which is likely a function of the economy and how that particular resort area does in a weak economy).

The post continues here. Hope you enjoy it!

Source: http://www.nakedcapitalism.com/2011/08/why-business-needs-certainty-is-destructive.html

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